(MENAFN- ValueWalk) President Joe Biden expanded the child tax credit at the time of the COVID-19 pandemic, but it expired in just a year. Lawmakers now are closing in on a deal to restore the expanded federal child tax credit. This deal to expand the pandemic-era credit will be in return for extending and restoring some popular tax benefits for businesses.
Expanded federal child tax credit in exchange for business benefits
Congressional lawmakers are reportedly working on a deal to partially revive the expanded federal child tax credit for lower-income families. The President expanded the child tax credit in 2021, but it expired that same year due to opposition from the GOP.
Democrats, since then, have been working to revive the credit, which pulled millions of lower-income families out of poverty. The expanded child tax credit would ensure that low-income families, who are often excluded from tax credits because they don't owe any income tax, will receive some federal assistance.
Although the negotiations are still ongoing, the total cost of the package is estimated to be between $50 billion to $80 billion. Democrats are focusing on raising the cash portion of the child tax credit families receive if they don't owe any money to the IRS. Presently, eligible families can claim $1,600 of the $2,000 per child credit as cash.
Republicans, on the other hand, want to expand several deductions that they believe could boost business investment. Two such provisions are: allowing companies to immediately deduct the cost of capital expenses, rather than spreading them over years; and re-enabling businesses to write off research and development expenses.
Several Democrats and conservative groups, including the National Taxpayers Union and Americans for Tax Reform, support these business-boosting measures as well.
Will there be a deal?
Rep. Jason Smith (R-Mo.) and Sen. Ron Wyden (D-Ore.) are working on a deal to expand the child tax credit, as well as business tax breaks. Even if these top tax lawmakers in the House and Senate reach a consensus, it isn't clear if the rest of Congress would approve the deal. Still, the deal – even if it fails – could serve as a foundation for a future deal between the two parties.
“I'm trying to get the biggest tax cut possible for these working families and there are a host of ways in which you can do it,” Sen. Wyden told HuffPost.
The package to restore the expanded federal child tax credit and business benefits would partially be funded by diverting funds from another pandemic-era tax credit, the Employee Retention Tax Credit (ERC). The ER program, which encourages businesses to retain their workers, has faced severe criticism for enabling potential fraud. Also, many believe the ERC is no longer needed, with the unemployment rate significantly lower than before.
Sen. Wyden believes that January 29, which is also the start of tax filing season, is the deadline for the changes to reach President Biden's desk.
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